Forget Net Neutrality: Just Take The Networks Away From The Telcos

from the root-for-no-one dept

Slowly, but surely, people are starting to figure out what's really going on with the network neutrality debate. While some of us have been trying to point out that the network neutrality debate is only clouding the real issue concerning competition in the broadband space, too many people have been focused on which side of the ridiculous debate you're on. However, both the telcos and the internet companies have been feeding the public exaggerated propaganda that continues to obscure the real issue. Hopefully the tide is turning. Last week, Tom Evslin wrote up a great summary of the situation, pointing out why both sides were lying and how competition was the issue. Now, Andy Kessler has matched him with a fun opinion piece for the Weekly Standard explaining why you should root for no one in the net neutrality debates. He points out that the telcos have to push against net neutrality, because otherwise their business model collapses -- an argument he made a few years ago when it came to line sharing (the lack of which has obliterated what little competition there was in the broadband space). Kessler goes on to knock down the telco supporters' favorite argument about how they'll never invest in new fiber without a guarantee of a profitable business model:

"Forget the argument that telcos need to be guaranteed a return on investment or they won't upgrade our bandwidth. No one guarantees Intel a return before they spend billions in R&D on their next Pentium chip to beat their competitors at AMD. No one guarantees Cisco a return on their investment before they deploy their next router to beat Juniper. In real, competitive markets, the market provides access to capital.

So, what's the solution? Kessler comes up with a modest proposal of sorts, that is amusing to read, but which will never play in Silicon Valley with its libertarian focus on "property rights." He suggests yanking language out of the Supreme Court Kelo "eminent domain" case -- and using that to argue for taking over broadband networks from the telcos (a situation for which there is some evidence that better broadband can be delivered). His point, satirically enough, is that if the threats are made loudly enough, it could freak out the telcos just enough to generate some real competition in new networks. Instead, though, we're left with arguing about silly side arguments backed up by musicians who have no clue what they're talking about. Suddenly, arguing for eminent domain over telco networks doesn't seem quite so silly...

Reader Comments

Aren't those OUR networks anyway?

I understand they maintained them over the years, but we forced them to expand and provide service to all areas - profitable or not. We did this with surcharges, taxes and government subsidies as well as the evils of emminent domain.

The public should own the networks anyway, just as we do the roads. A highway and an 'information superhighway' are both public thoroughfares and should be owned, regulated and maintained by the people - not profit mongers who only consider their shareholders.

I'm sick of the consumer always coming last in this age of advanced capitalism. It's time to revolt!

OUR networks

Yes they're our networks the same way MS is 'our' computer giant. You don't own any rights to them for paying them for the right to use their product. Nor would government subsidization give you or the government any rights to them.

The public SHOULD own the networks like we own the highways. However then you're dealing with a different giant in the governments/countries who would then control them in the name of the people. This creates a new international net neutrality debate potentially. Not to mention makes censorship or the flow of information on the internet MUCH easier.

Really... You're pretty screwed in any direction you go unless of course net neutrality itself is defended or we see a more competitive marketplace.

Forget Net Neutrality

Net neutrality ensures that websites like this don't have to use the "country roads" while the big corporate websites use the "superhighways". It sounds to me like you're shooting yourself in a foot for a little ad revenue.

Re: Forget Net Neutrality

Net neutrality ensures that websites like this don't have to use the "country roads" while the big corporate websites use the "superhighways". It sounds to me like you're shooting yourself in a foot for a little ad revenue.

Hmm. We understand what net neutrality is. The point is that it wouldn't matter if there were real competition, because no one would be able to break net neutrality.

Legislating net neutrality is missing the point. It's going after one small point that's the result of the lack of competition in the space.

If you read Techdirt on a regular basis, you would see that we're no fan of the telcos at all, so I'm not sure what you mean by us shooting ourselves in the foot for a little ad revenue?!? If you're going to accuse us of selling out, you'd better defend it a lot better than that...

That's plain stupidity

To your credit you discount this idea, well almost, up until the last line. Public roadways and informaiton highway are not similair other than some time ago the "highway" anaology stuck.

I have brought this up before but have yet to see any response, Net Neutrality in the current form being debated would eliminate a service providers ability to enter into an SLA which could l have a great impact on the business economy. For example, when a service provider signs up a 10 facility auto dealership they sign an SLA ensuring a certian quality and uptime between the delaerships. To do this the service provider must provide priorization for certain data on the network.

VOIP is another example of prioritzation of packets. How many consumers are willing to give up quality voice service so that 5 year olds across america can play on nickjr.com with quality bandwidth? Nothing of course against 5 year olds or Nick Jr.

And finally why should the internet be any different than anything else in America? Do all comapnies get the front cover advertising page? Doesn't Netflix have a competitive advantage by locating DC's near a post office and (I believe) paying some sort of fee to get priority services in return for only using the USPS? Why is this any differernt than soemone paying for prime delivery over a broadband pipe?

I think the big issue that is totally missing from the debate is the fallicy that "everyone business can be equal on the web" which started in the 90's to get companies to open websites. I mean think about it, can a small bookstore really compare with Amazon? Of course not. Why? Well lots of reasons bur for one because Amazon can spend far more money (which means take far bigger risks) than others on advertising, search engine placement, etc.... What I cant understand is why premium placement of an ad is any different than premium delivery of a service?

And finally "Forget the argument that telcos need to be guaranteed a return on investment or they won't upgrade our bandwidth. No one guarantees Intel a return before they spend billions in R&D on their next Pentium chip to beat their competitors at AMD. No one guarantees Cisco a return on their investment before they deploy their next router to beat Juniper. In real, competitive markets, the market provides access to capital.

True but in the examples given for the most part none of these companies need to worry about the gov't taking steps to completely turn their business models upside down. Can anyone imagine the outcry if Intel designed a chip that is so far beyond anything available today and than the gov't steps in and says "You cant only sell that in high end machines at 2k plus since that would mena the masses could not affort it. Instead you must sell it at a lower price." The entire investmetnt market would dry up in a hearbeat and the stock market would crash. How is the net neutrality debate which at its core is focussed on "best effort vs prioritized packets" any different?

Re: That's plain stupidity

"Doesn't Netflix have a competitive advantage by locating DC's near a post office and (I believe) paying some sort of fee to get priority services in return for only using the USPS? Why is this any differernt than soemone paying for prime delivery over a broadband pipe?"

You're central argument is flawed. The post office is one giant "network". There are not 100 post officess to pay to get your mail from point A to point B.

Let's say Google uses Verizon, they would have to pay Verizon for priority there, and TWC for priority there. They would have to pay Comcast, Covad, AT&T, DirectWay, Cox, Adelphia and the list goes on for access to each of their networks. This would fragment the net horribly, end up compacting the already miserable number of players, and make the net useless.

Now if there were 10 smaller ISP for every major metropolitan area, this may not happen. But the Telco's will just rewrite the DSL contracts with all the small players that they have to accept their prioritization and there is no competition again.

The NN debate would slow down what I already have access to. I 'PAY' for 5Mb service to my house, therefore if I am not going to be able to access content I want at that full speed(where it is available), then I should pay less. Google pays for a connection that theoretically can handle that 5Mb connection, TWC should not be able to limit me to 1Mb because Google could only afford to pay Verizon and AT&T.

The USPO does not charge a company more per piece when a company starts to overload them, they charge more for the bulk postage. So the carriers need to charge more to the "bulk" data houses.

Lastly when the USPO gets bulk mailings they charge bulk rates, so they actually ship more physically, the company pays less per piece. But with data, you ship more, you pay more?

The point is the telco's have oversold their capacity so vastly they can not do business anymore and want us to bail them out. I say they need to increase capacity so they can provide what they offer and charge for.

Re: Re: That's plain stupidity

The only stupidity is thinking the telco's have oversold their capacity. They are leaving large amounts of bandwidth unused so they can trot out their own tv and movie and music download services
and sign on their own web services and search engines then offer their own encapsulated version of the net with a thin string attached to the rest if you want to go to somewhere outside their "net".Have ya heard of AOL? Try Aol on steroids with a much more intrusive advertising scheme and no way to get away from it. That is what the telco's are trying to pull off here and all the sturm and drang they are generating is the magicians left hand.

Re: That's plain stupidity

I have brought this up before but have yet to see any response, Net Neutrality in the current form being debated would eliminate a service providers ability to enter into an SLA which could l have a great impact on the business economy. For example, when a service provider signs up a 10 facility auto dealership they sign an SLA ensuring a certian quality and uptime between the delaerships. To do this the service provider must provide priorization for certain data on the network.

SLAs are crap. The individual consumer who signs up for a TCP/IP pipe into her home should expect the same level of service as a big corporation. The fact that big corporations pay for SLAs says more about the implied shaft given to individual consumers. If the networks were more bulletproof, big corporations would not need the protection of a SLA and the individual consumers would be getting superior service. One supposed benefit of network neutrality is that competition between service providers could lead to just such a more bulletproof network as competitors strive to create better and better networks.

VOIP is another example of prioritzation of packets. How many consumers are willing to give up quality voice service so that 5 year olds across america can play on nickjr.com with quality bandwidth? Nothing of course against 5 year olds or Nick Jr.

Again you miss the point. You're looking at it in terms of scarcity of resources. Much like the argument that the well-off people are taking an unfair piece of some static "pie" and that the poor folks are getting much less. Another assumption of network neutrality is that as the network improves, the pie gets bigger. Meaning we're not talking about scarcity of resources, we're talking about improving the resource. Look at it this way. The best network is one that is robust enough to support lagless VOIP --AND-- kids on Nick Jr. or whatever. (And yes, for the seriously technically inclined, I am purposely avoiding the argument here that Nick Jr. web pages require vastly less bandwidth than your average VOIP phone call.)

And finally why should the internet be any different than anything else in America? Do all comapnies get the front cover advertising page? Doesn't Netflix have a competitive advantage by locating DC's near a post office and (I believe) paying some sort of fee to get priority services in return for only using the USPS? Why is this any differernt than soemone paying for prime delivery over a broadband pipe?

Ummm... Sure the Internet started as a US military project. But it's a little bigger than that now. There's some very valid arguments against the issues you state, but your examples are so US-centric I'd like you to restate your question a bit in terms of "...in the world" vs. "...in America" (by which your examples seem to imply the US, forgetting about the rest of the Americas that comprise the Western hemisphere). Try to find some global examples of what you mean. As you struggle, realize that is part of the point. The Internet is bigger than any one country or its customs, culture or economy.

I think the big issue that is totally missing from the debate is the fallicy that "everyone business can be equal on the web" which started in the 90's to get companies to open websites. I mean think about it, can a small bookstore really compare with Amazon? Of course not. Why? Well lots of reasons bur for one because Amazon can spend far more money (which means take far bigger risks) than others on advertising, search engine placement, etc.... What I cant understand is why premium placement of an ad is any different than premium delivery of a service?

It's different because it's not a tangible good. Which doesn't mean it doesn't have tangible benefits. What does this mean in terms of business? The Internet itself is NOT an end product. It is merely a tool. This is not to say that tangible electronic-media end-products cannot be created that use the Internet. Just that the Internet itself is not the product. Go from there on your delivery analogy and it unravels further.

And finally "Forget the argument that telcos need to be guaranteed a return on investment or they won't upgrade our bandwidth. No one guarantees Intel a return before they spend billions in R&D on their next Pentium chip to beat their competitors at AMD. No one guarantees Cisco a return on their investment before they deploy their next router to beat Juniper. In real, competitive markets, the market provides access to capital.

True but in the examples given for the most part none of these companies need to worry about the gov't taking steps to completely turn their business models upside down. Can anyone imagine the outcry if Intel designed a chip that is so far beyond anything available today and than the gov't steps in and says "You cant only sell that in high end machines at 2k plus since that would mena the masses could not affort it. Instead you must sell it at a lower price." The entire investmetnt market would dry up in a hearbeat and the stock market would crash. How is the net neutrality debate which at its core is focussed on "best effort vs prioritized packets" any different?

Again some would argue that this is exactly the type of situation network neutrality would fix. Your example uses the current-network situation where telcos can soak business customers for more money because they are using more bandwidth, because bandwidth is a scarce resource. If the network "pie" were big enough that bandwidth was not the scarce resource of the network, then companies would not need to pay premium charges for "high" bandwidth.

Unrealistic, but let's dream a little. Consider what would happen if suddenly today we decided that all of the world's Internet traffic only took up of 50% of any telco's bandwidth even at peak times on the most congested segments of its network. Meaning, what if the network was so good that the telcos didn't have to worry about keeping "extra" bandwidth for network stability issues? Under the current setup, the telcos could still soak businesses for "high-bandwidth" connections or increased used of the network. In such a world, if network neutrality existed, businesses could just choose a service provider that charged them the same as any other individual network user. Arguments that businesses would be "hogging" bandwidth from consumers at the consumer rate would be null and void because bandwidth is no longer a scarce resource. Arguments that poor consumers need to have a subsidized resource are moot because network connectivity would be cheap enough that everyone could afford it. Perhaps this is a bit utopian, but I don't think we're too many years away from such a reality.

Technology goes through waves where different parts of the system are more scarce or plentiful than others. Sometime network bandwidth will be a less scarce resource, and the scarce resources will be in terms of whether someone has a slower or faster computer connected to the network. Meaning, perhaps individual consumers will not be able to afford business supercomputers, but both business supercomputers and individual computers will be able to share the same network without any thought of crippling the network.

Re: That's plain stupidity

quote: "
True but in the examples given for the most part none of these companies need to worry about the gov't taking steps to completely turn their business models upside down. Can anyone imagine the outcry if Intel designed a chip that is so far beyond anything available today and than the gov't steps in and says "You cant only sell that in high end machines at 2k plus since that would mena the masses could not affort it. Instead you must sell it at a lower price." The entire investmetnt market would dry up in a hearbeat and the stock market would crash. How is the net neutrality debate which at its core is focussed on "best effort vs prioritized packets" any different?"

Haven't you done any research on net neutrality at all? Net neutrality has been a part of the net for over a decade, until just last year when the telcos convinced the FCC to change the rules. This isn't a debate about adding net neutrality, it's about fixing it since the telcos broke it.
Now, I'll admit I don't have a problem with certain types of content getting priority- such as video over email. I DO have a problem with certain companies taking priority, especially when it's the telco's decision. That stifles the net.

Plain and Simple

Net Neutrality and the "Next Gen" Network

Isn't there already development work ongoing on the "next generation internet?" Is this development mostly academic, or are the telcos integrally involved? Will the new internet use the existing cabling, or will new lines need to be strung nationwide? Would it make sense to start pushing for the cabling of this new internet to be owned by "the people" (i.e. the government)? That would seem to solve several problems from the consumer's perspective, but what problems would arise?

capitalism??

"I'm sick of the consumer always coming last in this age of advanced capitalism."

That statement just makes me laugh. This isn't capitalism at work here. In real capitalism the consumers can vote with their money. In this case, the Telco's have government mandated monopolies.

In fact, most of this problem stems from the fact that we used the "American System" of economics for about 100 years and created a number of homeland monopolies before we started to switch to a free market society. This kind of crap is the leftovers.

Check WA State as example of publicly owned broadb

For those who doubt there can be a successful alternative to big Telco provisioning of broadband, check out Washington State's policy of allowing its Public Utility Districts to wholesale telecommunications services.

I live in Chelan County where the PUD is successfully deploying fiber to the premise with a goal of 80% coverage by about 2008. Our community is benefitting from the surge of innovative broadband services (voice, video, and data) being offered by over a dozen ISPs and independent telephone companies. Instead of lowering the quality of service, as the Telcos and cable companies predicted, our small market community is gaining access to competitively priced, high quality, innovative communications services from this move.

Not only has the community benefitted, but so has the local economy. I worked with the PUD in developing the channel program that gives access to this public resource to qualified resellers. Many ISPs who would have failed in the face of broadband offerings from cable and the local Telco, have used the public broadband network to grow their businesses. Reversals in The Telecommunications Act of 1996 have allowed the Telcos to lock out the independent phone companies that flourished in the wake of the Act's creation, but our public broadband network has given at least one local phone company needed local loop access. It currently offers voice, Internet and television programming over the network.

Our publicly owned broadband network, among other enticements, has propelled Wenatchee Valley, in Chelan County, WA, to the number two real estate market in the country. You other potential "New Geography" [read Joel Kotkin's "The New Geography] destination communities ponder that for a moment...but, don't take too long. ;-) -dj

Consumer logjam

I wouldn't care one way or the other but I feel the choices for broadband in my area are limited. You pretty much have two or three big mega-corporations to choose from and that's it. Plus the options are bundled with either phone or cable so you have to get one or other limiting the choices even further. What if I want cable broadband but have no interest in watching cable TV? Or what if I want DSL but have no interest in having a land line since I have a cell phone?

Ideally cable TV would let you pick what channels you want in the package. And what's with the phone companies requiring 1 year contacts, meanwhile they lower the price of monthly service for new customers. Both of these business moves leaves me with no respect for the companies and I don't trust them to be fair. They need to open up their markets and invite more competition.

Parallels?

Haven't there been situations in the past when those who controlled content also controlled distribution? Didn't the government step in and end those situations? Aren't the movie studios prevented from owning movie theaters, because it provides the means by which they may limit consumer choice? Aren't the record labels prevented from owning radio stations for much the same reasons?

The bottom line: If the telcos are providing content, they should not control the distribution of that content.

A question for DeRicki: How does the local government handle maintenance of that network? Or is it so new that there haven't been any problems yet due to weather/age/mischief? How efficient/timely have the repairs been?

yep - these are OUR networks

how soon we forget. the airwaves belong to the public. companies can *lease* them from the public and it's the job of congress to make sure the rules are set so that companies cannot steal or abuse what's ours.

Re: Re: yep - these are OUR networks

and telcos must be granted the right to build on public right-of-ways and to carry the signal.

i know that since the 70's in the U.S. there's been a huge push to 'corporatize' public utilities from the phone service, through power-generation, and now cable and internet services. this is a bad move.

the assumption that corporations are, by their nature, more effective, more efficient, more trustworthy than community-based entities is simplistic and shortsighted. the fact that the U.S. congress has badly screwed up the communications infrastructure is no help, i admit. but ath does not justify turning it over the companies driven by shareholder and profit pressures.

turning community infrastructure over to for-profit entities will come to a bad end.

Re: yep - these are OUR network

Um, most of you have no idea what you are talking about. Please read telecom history.

The complete cable plant was paid for by ratepayers with the Telcos acting as a legal, regulated monopoly. The ratepayers did pay for the network, and regulation up till recently required that the Telcos use the infrastructure as a common carrier and for the benefit of the ratepayers. Telcos got a guaranteed rate of return on the capital invested.

The skill that Telcos most developed was manipulation of their regulators and the government. They were able to twist the Telecom Act of 1996 to allow them to gain total ownership of the plant that was paid for by the ratepayers and built for the benefit of the ratepayers under the regulated monopoly.

The Telcos got to steal that from the Ratepayers and now they can even use their monoploly revenue to pay for the new plant (the little that they are actually building). They also kept promising fiber to the home in exchange for being allowed to remerge into AT&T and Verizon. But they have not delivered on any of their commitments.

So there is plenty of basis to re-breakup the phone companies and take back OUR network.

internet speed gaurenty

Hear in the uk i have noidesr how how owns the network, But what i do no is that isp's have sold ther broadband cheep almost makeing no money and so now the brodabd subcribers haverissen dramicticly wher netowrks have remined the same. So the internet is slowing down Im currnetly with the cepest isp avlibe as a result my internet is teribly slow and they shape my trafic. what they need to do is ofer me gaurentied speed say 2mbs max but 1mbs min so no mater wats going on i have that speed and give me unimited bandwith and stop blocking stuff and i would pay for that then they could buid the network.
In terms of what the isp's say about haveing a tool road for priority trafic. Is it only me who thinks what they inted to do is more like coneing off 2 lanes of a moteway for tolpayers and less like building a bright shiny new road for people who pay. anyway should probly have wasted this rant on my own blog not yours buy hey.

Telcos are screwing themselves a bit, aren't they?

Out of nothing but curiosity...

Back when I used Charter Cable, they had some sort of big deal going with MSN Search. Basically, they made a hybrid homepage that would let me check my charter email (which I never used) through the MSN/Hotmail interface, and put a nice Charter logo in the upper right corner of the MSN Page.

Now, not being any more business-savy than I am, I'm going to act like an idiot and assume that charter probably either paid 10 million bucks for that privlage, or gave MSN "free extra bandwidth" or such.

Now let's assume the telcos (charter included) have thair way and can tax any site using a lot of bandwidth. Since MSN Search is the third biggest site on the net (after Google and Yahoo) then clearly that'd be a ton of money, even for the lightest amount of bandwidth usage or the smallest charge. Under the deal like charter had with MSN, then they'd be taxing MSN for the privlage of using MSN as charter customer's start page.

So in a way, doesn't this kill any chance or hope of search engines making deals with the telcos, even when those deals would typically help both the telcos and the search engines? Even more so, doesn't that in turn prevent search engines from asking OEMs to make them their default engine/page like the big deal Google just made with Dell? Why would any site want to be a start page in this case?

If we assume that 60% of the people who buy a new dell with the google start page use it, but 40% don't, and dell sells 2 million PCs with that google sart page, then that means Google would have to pay telcos for 800,000 start page hits which would be completely wasted, at the very least (assuming people open the browser at least once to change the page.) Worse still, for the remaining 1,200,000 people who keep using google, many of them might open a browser just to go to an address, like we'll say techdirt. Even then, when users don't actually use google and instead go directly to a URL, it would cost google the taxes for that hit.

And that's just search engines. That doesn't count other services on the net, like news pages (i.e. Techdirt, Slashdot, etc) or major download sites (Sourceforge, etc) or even, as mentioned, YouTube and VoIP services. I suppose I'm asking if maybe this would spell an end for pre-installed software? Wouldn't this mean that most companies would never agree to come preinstalled on new machines, and companies couldn't afford leads that don't generate a sale? If someone (like me, for example) wanted to read about 40 pages of the skype site before downloading and using it, and then only buy one set of airtime at once, or even make free internet-only calls, then wouldn't skype have no hope of turning a profit from that? Doesn't this spell an end to most advertising?

If so, what would happen to tne entire internet ad industry? I'm assuming it wouldn't just dry up, so what's the alternative? Does that mean that every site on the net starts charging users to use it, since advertising is no longer profitable for the ad companies? Or does it mean that you're required to fill out big, long, detailed "surveys" when you get a new PC so they can target ads to you without wasting money? Wouldn't that in effect be forced spyware?

That's my question, I suppose. Even if you believe every argument the telcos have, in some way or form, doesn't it eventually either make the internet undesirable to most users, and cut out 50%+ of their customers, or even worse, doesn't it spell a complete end to free internet? If sites must pay out the rump for the use of other lines, then how does a site afford that?

The only viable alternative I can see to this is a complete and total internet monopoly. If NN was to suddenly be abolished and all the telcos did as I've described, and consumers get pissed, so they're risking losing them, then what happens? Isn't it logical that a single telco (we'll say Charter for arguments sake) could come up with a "all bandwidth that only uses charter lines is untaxed" gimmick, and in doing so, make most sites and users use only charter lines? If they do that, and then other telcos don't catch up quick enough, that means their competition - cox, comcast, direcway, DSL and the like - would seemingly dry up. Once that happens, and Charter has a total monopoly on the market, then they could raise prices. They could raise them as far as $400 or more a month, until internet services costs as much or more than power and water. Sre, eventually people would revolt and quit paying it, but if customers payed even $200 a month for a 256kb/second line since there would be no alternative, can you immagine the money generated in a single month from a total global internet monopoly?

It's just a thought, but perhaps by getting rid of NN the telcos will actually kill the internet altogether, and in doing that, they could easily screw themselves with their own really big stick.